$214m tax boost for Kiwi funds

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A change to international accounting rules will boost Kiwi Income Property Trust unit holders' funds by about $214 million.

Trust manager Kiwi Income Properties said an amendment made by the International Accounting Standards Board would have an impact on an unintended consequence that arose out of the Government's decision this year to strike out depreciation allowances on building structures.

As a result of the change made by the Government, building owners, such as the trust, were required to provide for a deferred tax liability which would not crystallise even if the trust's properties were sold, the manager said.

For the trust, the accounting board's amendment would have the effect of reversing a one-off deferred tax liability of $143.9 million, with a corresponding decrease in deferred tax expense, recognised in the trust's financial statements for the six months to September.

That liability had arisen as a result of the removal of the depreciation deductions.

Also, previously recognised deferred tax liabilities in respect of unrealised revaluation gains and deductible capitalised costs of $69.9 million, as at September 30, would be reversed.

The net effect of those entries would be an increase in unit holders' funds of about $214 million, with the adjustments to be reflected in the annual financial statement.

- NZPA